What The comScore-Rentrak Merger Means For Nielsen

• COMSCORE, Inc. SCOR announced it will acquire Rentrak Corporation RENT in a stock-for-stock transaction.
• Toni Kaplan of Morgan Stanley argued in a note that the combined companies is in a better position to compete against Nielsen N.V. NLSN.
• Kaplan noted the deal represents a "modest negative" for Nielsen.

comScore and Rentrak announced on Tuesday a stock-for-stock merger which will create a stronger entity to compete against Nielsen.

Commenting on the deal, Toni Kaplan stated that the combination of comScore and Rentrak creates a "cross-platform measurement company that aims to form a new currency" to better compete against Nielsen. The analyst added that the combination of the two companies should be viewed as a "modest negative" for Nielsen given the now greater scale and capabilities of comScore and Rentrak.

Related Link: Bob Peck: comScore-Rentrak Merger Has 'Strategic Merit,' Notes Combined Company 'Creates Stronger Competitor'

Despite the intensified competitive landscape, Kaplan argued that Nielsen will still emerge as a "leader" in cross-platform measurement due to: 1) its dominance in U.S. national TV, 2) the quality of its digital product offering, and 3) its significant resources.

Kaplan pointed out that the combined market cap of comScore and Rentrak of roughly $2 billion will still be "vastly smaller" than Nielsen's $17 billion market cap. Moreover, comScore and Rentrak's combined long-term revenue estimates of $457 million falls well short of Nielsen's $6 billion.

Finally, Kaplan said it is "unclear" how a combined comScore and Rentrak will address the limitations of set top box data and whether it will be able to obtain representative, individual demographic metrics comparable across platforms.

Shares of Nielsen remain Overweight rated with an unchanged $53 price target.

Image credit: flash.pro, Flickr